Terex Corp. last week announced a net loss for the third quarter of 2009 of $103.1 million, or $0.95 per share, compared to net income of $93.8 million, or $0.96 per share, for the third quarter of 2008. Net sales were $1.23 billion in the third quarter of 2009, a decrease of 51.2 percent from $2.51 billion in the third quarter of 2008. Net sales decreased approximately 49 percent from the comparable prior-year period when adjusting for the translation effect of foreign currency exchange rate changes, which more than offset the net sales relating to the acquisition of the port equipment businesses of Fantuzzi Industries and Noell Crane since late July 2009. During the third quarter of 2009, the company incurred after-tax charges of approximately $19 million, or $0.18 per share, associated with restructuring programs and a continued reduction in production levels. All per-share amounts are on a fully diluted basis.
“This was a disappointing quarter but we feel that we are turning the corner to better performance,” said Ron DeFeo, Terex chairman and CEO. “We have built a company that is both geographically and product diverse, but virtually no part of our business has weathered these market conditions unscathed. Fortunately, we see signs that certain markets have stabilized, and even a few signs that point to growth.
“We are continuing to aggressively reduce costs as our business will be roughly half the size in terms of net sales than it was in 2008. Manufacturing spending in the third quarter of 2009 was down 52 percent from the peak spending levels during the second quarter of 2008 and 7 percent sequentially from the second quarter of 2009. When combined with further reductions of selling, general and administrative expenses, these actions resulted in a $265 million quarterly run-rate spending reduction in the third quarter of 2009 versus spending levels in the second quarter of 2008. We continue to target a $300 million quarterly run-rate reduction by year end.”
Loss from operations was $94.5 million in the third quarter of 2009, as compared to income from operations of $167.2 million in the third quarter of 2008. The third quarter of 2009 operating margin was negative 7.7 percent, versus operating margin from the third quarter of 2008 of 6.6 percent. Lower total net sales negatively impacted profitability by approximately $379 million. Costs, primarily related to reductions in production levels and restructuring charges, negatively impacted profitability by approximately $24 million. Offsetting these negative results was a reduction in SG&A and other costs of approximately $141 million.
“Our third-quarter performance reflected both the reduced demand environment and our global restructuring effort,” said Tom Riordan, Terex president and chief operating officer. “Most of our factories were working on reduced schedules, with a build-to-order approach in order to reduce inventory. We have made good progress in reducing our finished goods inventory, but it is an ongoing process. In some specific product categories we may actually be a bit too low. As a result, we will need to produce for new orders, which should lessen the negative impact of underabsorption on our financial results. While we do not expect any near-term material increase in demand, when it occurs we will be in a good position to capitalize. Our short-term cash management focus has led to inventory reductions that generated cash of approximately $497 million year to date, substantially delivering on our $500 million goal for the year in the first three quarters.”
Net sales for the Aerial Work Platforms segment for the third quarter of 2009 decreased $397.7 million, or 66.5 percent, to $200.5 million versus the third quarter of 2008. Excluding the translation effect of foreign currency exchange rate changes, net sales decreased approximately 65 percent. Rental customers in the North American and European markets continued to age and reduce their fleets, deferring the purchase of new products.
Net sales for the Construction segment for the third quarter of 2009 decreased $298.8 million, or 55.9 percent, to $236.2 million versus the third quarter of 2008. Excluding the translation effect of foreign currency exchange rate changes, net sales decreased approximately 52 percent. Demand for both compact and heavy construction products remained weak during the third quarter of 2009 as construction activity continued to slow globally and commercial financing availability for projects and equipment remained tight. Most Construction segment businesses and their independent distribution networks continued to make progress on reducing finished goods inventory.
Net sales for the Cranes segment for the third quarter of 2009 decreased $282.3 million, or 38.3 percent, to $454.6 million versus the third quarter of 2008. Net sales decreased approximately 37 percent from the comparable prior year period when adjusting for the translation effect of foreign currency exchange rate changes, which more than offset the net sales relating to the acquisition of the port equipment businesses since late July 2009. Net sales of rough-terrain and tower cranes remained significantly below levels achieved during the third quarter of 2008, as global commercial construction continued to slow and oil-related energy demand for rough-terrain cranes remained soft. Sales of lower capacity all-terrain cranes have also weakened, although demand continued for high capacity crawler and all-terrain cranes for global infrastructure projects and energy related projects such as wind power and power plant construction.
In the Materials Processing & Mining segment net sales for the third quarter of 2009 decreased $323.2 million, or 48.8 percent, to $338.8 million versus the third quarter of 2008. Excluding the translation effect of foreign currency exchange rate changes, net sales decreased approximately 44 percent. Materials Processing demand appears to have stabilized, with modest sequential improvement in sales each quarter during 2009. However, Materials Processing sales remain substantially below 2008 levels, with net sales in the third quarter of 2009 down more than 60 percent as compared to the third quarter of 2008.
“We are at an inflection point in this business cycle and I believe it is now time to focus on growth while continuing to hold the line on costs,” DeFeo said. “We have obviously taken a defensive posture to preserve the enterprise during this period of incredible economic uncertainty, but we believe progress can be made from here going forward. We recently held a North American dealer and customer event, and what we heard reinforces our views that the current business environment has stabilized and optimism is beginning to build for 2010 and 2011.”
The company continues to expect its 2009 net sales to decline approximately 50 percent when compared with 2008, approximately 5 percent of which is due to the estimated translation effect of foreign currency exchange rate changes. The anticipated year-over-year decline in net sales reflects weak global end-markets combined with continued constrained credit availability worldwide.
Westport, Conn.-based Terex Corp. is a diversified global manufacturer with 2008 net sales of $9.9 billion. Terex operates in four business segments: Terex Aerial Work Platforms, Terex Construction, Terex Cranes, and Terex Materials Processing & Mining.